HELSINKI (Dow Jones)--Finnish handset maker Nokia Corp. (NOK) relies heavily on contract workers at its Chennai mobile phone factory in India, paying them less than minimum living wage, said Finnish human and labor rights organization Finnwatch in a report published Tuesday.

Finnwatch criticized Nokia for precarious work conditions by having 19% of its local work force on time-limited contracts with a further 26% as "trainees" for 16 months before being permanently employed on higher salaries.

"Precarious employment refers to temporary, part-time and casual jobs which do not provide the same conditions and benefits as regular, permanent employment," Finnwatch, an independent research organization monitoring Finnish companies' operations in developing countries, said.

Nokia's mobile phone factory in Sriperumbudur is its largest in the world, employing over 11,300 workers producing about 300,000 handsets per day.

Global handset sales soared an annual 32% to 1.6 billion units in 2010. While Nokia remained the leader with sales of 461 million handsets, its market share declined to 25.1% in the first quarter from 30.6% a year earlier, according to market researcher Gartner Inc.

Nokia's ethical compliance manager Miia Haapuoja said "contract workers were being used due to the strong seasonality in this industry."

While Nokia said it pays contract workers and trainees 25% above the legal minimum wage for contract staff--around 4,400 rupees, or EUR70 a month--the Finnwatch report cites Asia Floor Wage campaign as saying a monthly minimum living wage is EUR127.

Nokia said Asian Floor Wage's estimate was done for the urban Delhi area and could not be compared with the more rural Sriperumbudur area, where its factories are based.

According to Finnwatch, the monthly salary of permanent assembly workers varies between EUR95 and EUR186.

It said Nokia pays better wages than its local sub contractor handset charger maker Salcomp Oyj (SAL1V.HE), charger maker Flextronics International Ltd (FLEX), and handset contract maker Foxconn International Holdings (2038.HK). This was due to a wage deal settled last year and adopted by the newly established Nokia India Employees' Union.

Nokia spokeswoman Eija-Riitta Huovinen said the 16-month training period was not being used as a probation period.

"The training is very comprehensive because the people that come to work have very diverse backgrounds, many from rural villages, and they are the first generation of high technology factory workers," Huovinen said.